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North Carolina State Taxes

North Carolina sales tax guide

North Carolina offers incredible scenery, ranging from the Appalachian Mountains to the ocean and everywhere in between. From the beautiful Asheville area in Western North Carolina to the sandy beaches of the Outer Banks, understanding the state tax system is crucial for anyone moving to or currently living in the Tar Heel State.

North Carolina is generally considered a moderately tax-friendly state, with state income taxes expected to decrease further in the coming years, putting it in the bottom third of states’ income tax rates. Whether you are considering a move, recently moved, or already here and seeking information, we’ve got you covered. Below, we break down everything you need to know about state taxes in North Carolina. 

Key Takeaways

  • North Carolina is considered a moderately tax-friendly state. 
  • The state levies a flat individual income tax rate of 4.25% as of the taxable year 2025.
  • Property taxes vary by county and municipality.
  • North Carolina does not have an estate tax.

North Carolina State Income Taxes

North Carolina employs a flat individual income tax rate, meaning all taxpayers, regardless of income, pay the same percentage of income tax. For taxable years beginning in 2025, the rate is 4.25%; for any year after 2025, it will be 3.99%. For the most up-to-date information, see the North Carolina Department of Revenue (NCDOR) website.

A new tax structure was enacted under Session Law 2023-134, gradually lowering the individual income tax rate on a trigger-based system. Depending on specific triggers, income tax rates could be further reduced, starting with tax years beginning in 2027. 

NC Property Taxes

North Carolina does not employ a statewide property tax. Instead, all property taxes are levied at the county and municipality levels, meaning taxes vary depending on where you live. As of 2023, the state’s effective property tax rate was 0.62%.

Depending on your location, you may owe both county and municipal property taxes. For example, Asheville residents pay property taxes as listed:

  • City tax rate: 44.19 cents per $100 of assessed valuation.
  • County tax rate: 54.66 cents per $100 of assessed valuation.
  • City School tax rate: 11.00 cents per $100 of assessed valuation. Not all City of Asheville residents pay the City School tax.

For most property taxes, the lien date is Jan. 1. Put simply, this means the individual who owns the property on that date is liable for the taxes. One exception to this rule is the Motor Vehicle Property Tax.

There are several exemptions, including those for individuals over 65, permanently or totally disabled individuals, disabled veterans, farm or forestry landowners, and individuals with wildlife conservation lands. Check with your county of residence for more information. 

North Carolina Estate Tax

North Carolina does not levy an estate tax. It is important to note that your estate may still be subject to federal estate taxes if its value is high enough. If you’re unsure about your estate planning needs, speaking with a financial advisor is a wise idea. Horizon’s Wealth Management services include estate planning, ensuring your peace of mind as you navigate your finances. 

North Carolina Retirement Tax

North Carolina is considered moderately tax-friendly for retirees. Retirement income is as follows:

  • Social Security benefits: exempt. 
  • Military pensions: exempt.
  • All other retirement income: subject to standard flat income tax rate. 

As discussed, North Carolina does not have an estate tax, allowing retirees to pass on their financial legacy without worry of additional taxes. 

Bottom Line

North Carolina is moderately tax-friendly, with a flat-rate individual income tax that places the state in the bottom third of the US. Additionally, the average property tax is relatively low, there is no estate tax, groceries are taxed at a lower rate (mostly 2%), and prescription drugs are exempt from sales tax entirely. 

If you live here in the Tar Heel State, recently relocated, or are considering a move, Horizon’s Wealth Management can help you manage and understand how state taxes will affect your finances.

NC Taxes FAQ

Is North Carolina a tax-friendly state?

North Carolina state taxes make it a moderately tax-friendly state. It is placed in the bottom third of state income tax rates as of 2025. 

What is not taxed in North Carolina?

Social security income, military pensions, inheritance/estate and prescription drugs are exempt from taxes in North Carolina. There are also property tax exemptions for several categories. Additionally, groceries are taxed at a lower rate than normal sales tax, usually 2%.

Is it cheaper to live in NC or SC?

South Carolina is considered slightly more tax-friendly for retirees due to additional deductions allowed for qualified retirement income and the state’s overall income tax structure. However, if you are in a high tax bracket, SC does employ a graduated tax structure for its state income tax. If you’re choosing between the states, an advisor at Horizon’s Wealth Management can assist you in finding your best tax outcome.

At what age do you stop paying property taxes in North Carolina?

There is no age at which you stop paying property taxes in North Carolina. There is an exemption that can be applied for, which reduces property taxes for individuals over 65 with an income below a certain threshold. For 2025, that limit is $37,900.

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4 Post-Work Life Tips

How to have a long and healthy retirement:

It’s a time when we’re supposed to find happiness, but post-work life is often associated with severe health problems. Below are some tips to help you live long and prosper.

Source: https://www.theguardian.com/lifeandstyle/2017/may/15/how-to-have-long-and-healthy-retirement

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How To Get The Most Out Of Your Social Security Benefits

When to start taking Social Security benefits is one of the most critical factors influencing your financial security in retirement.  Sadly, studies show that most Americans are clueless about Social Security Benefits.  When and how to file for social security benefits is an important decision. With the right planning, and possibly deferral of your benefits, you can be guaranteed a return of 8% per year. Yes, 8% per year!  *

Where else can you get this kind a guaranteed return on investments?  Stocks carry investment risk and cash-equivalents are very unlikely to keep pace with inflation.

If you were born in 1943 or later, for every month you can defer drawing social security between your full retirement age and 70, you earn a ‘delayed retirement credit’ of 2/3rds of 1 percent – that’s the 8% per year.  Filing too early for retirement means your benefits might be reduced as much as 30%.

For example: Let’s say you’re a healthy 62 year old and you are set to earn a benefit of $1,000/month at your full retirement age of 66. By choosing to withdraw at 62 your benefits are reduced to $750 a month. Delaying until 70 increases them to $1,320 a month.  According to the Social Security Administration, one in three 65 year olds today can expect to live to 90. Taking early retirement or delaying until 70 can have a dramatic impact on your benefits.

If your spouse is eligible for social security based on your work record (for example, if he/she did not earn enough credits or were lower earners during their career), your decision will also affect their lifetime benefits. There are numerous strategies that could increase your lifetime benefits by tens or even hundreds of thousands of dollars.

First understand there are three basic forms of retirement benefits: The Worker Benefit, The  Spousal Benefit, and the Survivor Benefit.  So, how do you plan for maximizing your benefits and bridging the gap until your optimal withdrawal age? There are multiple considerations: Your health, whether you are married, divorced or single, your willingness and ability to continue working, and the availability of other sources of retirement income.

A good (but basic) starting point is the Social Security Administration’s own Retirement Estimatoror other calculators.  Quicken 2015 has a new Social Security Optimizer tool (paid) while a variety of paid and free sites offer estimators to varying degrees of effectiveness. We have some sophisticated software that can run advanced social security projections.

For many of our clients, the answer isn’t as straightforward as age vs income. We consider all aspects of our clients’ situations and present a variety of scenarios, along with our recommendations. Strategies might include ‘file and suspend’ (more on that in an upcoming blog) and drawing down retirement accounts more aggressively before age 70.

The decision – like everything in personal finance – is personal.  However, making the right decision can make a substantial difference.  Know the rules before making critical decisions.

The unknown variable of how long a person will live makes this decision very un-scientific. The latest government statistics show that men alive at age 65 are expected to live to age 82.9; women of the same age are expected to live to 85.5.

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